2nd Interactive Session: Nigel Baxter

Good Morning, I am Nigel Baxter, I am the Group Transport Director for RH Freight Services based in the UK but operating multi modal services to all EU states and beyond.

I am here to discuss the value and benefits of co-operation between private businesses in both freight forwarding and pan - European road haulage and in particular our experience with the accession states from the Baltic region.

In principle my company has endeavoured to create a consignment "conveyor belt" for cargo to and from the UK.

This has been achieved by developing two concepts coupled with hard work and close attention to customer service and quality.

The first was to develop partnerships or co-operations in each country or in some cases specific regions of countries.

These partnerships are founded with privately owned businesses similar to our own with the purpose of developing traffic routes or "lanes" between major cities in the country of operation and our two terminals or "hubs" in the UK and whilst this principle is followed by many of our competitors our goal has been to refine this process and ultimately work within the 'premier league' of European forwarding operations, today we regard our partner network as the envy of our competition which is of course considerable.

Establishing relations with strong companies is of course the life blood of any business, however in our operations there are huge benefits, normally there is already a level of consignment volume in both directions (although this has not always been the case), Starting from nothing is both extremely hard but usually prohibitably expensive, this due to commitments to high levels of service and thus expense without the required level of consignment volume to cover even the base costs.

Secondly it is virtually impossible to build and generate a business with the required level of local expertise, language and management from the base of a medium sized operator, certainly in a short period, that preserve is saved only for those benefiting from the investment of almost limitless public funds, principally for acquisition's, Deutsche Post being if course the most extreme example, thus in reality there is no other solution for a business such as ours to literally deliver performance and growth in a relatively short period of time.

We have now successfully developed 48 co-operations extending to EU member states and beyond, this results in almost 24000 consignments a month through our UK hubs, the breadth of service makes us we believe to be the number one option for European groupage to and from the UK, indeed we can count on most of the part or state owned multinationals as our clients.

So how to make it work, most people would recognise that the UK has pretty unfavourable "climate" for the provision of road haulage, extremely high levels of fuel duty and an ageing driver pool (majority in the 45 - 55 yr bracket) compounded by low entry into the industry caused in part by legislation but also by lack of government training initiatives and encouragement by career officers. Couple this to poor public perception of the road transport sector (I never cease to be amazed that in such an "on demand" country such as Britain where literally everything moves by road that there is such low tolerance to trucks) and it is no surprise that we do little to entice new people into the industry thus creating a supply problem that has fuelled huge increases and expectations in terms of salary making British drivers among if not the most expensive in Europe.

Whilst in part these costs are absorbed in the domestic transport market given that they so often represent a relatively small part of the total product cost, (for example do Tesco the number one food retailer with over £2 billion profits in 2004 really concern themselves with the cost of delivery drivers?) in the arena of international road transport they have made UK based operators extremely uncompetitive, one only has to look at statistics from the Department for Transport to see that the number of UK registered trucks operating in and out of the UK has been static since the mid 1990's and even then there had been only a marginal increase on the previous five years, all the growth (which has been substantial, over 700,000 movements per annum since 1998) has been taken by foreign registered trucks, these now account of over 75 pc of the total movements which in 2004 numbered just short of 2 million itself an increase of 8 pc on 2003.

This of course makes perfect sense, the UK has a huge imbalance in terms of the ratio of imports to exports, it is logical that these journeys originate outside the UK, however each of those empty trucks needs a load back into Europe, supply and demand dictates the market rate and as such British trucks are disadvantaged against much lower cost base operators principally as a result of labour rates but also high vehicle road taxation and of course huge disparities in fuel duty.

In this fairly "hostile" environment we needed a solution, we had already developed extensive express services to Italy and Spain using double (two drivers) manned British crews, these were highly successful and profitable, however driver recruitment was already starting to become an issue and as I have mentioned previously escalating wage costs were beginning to bite, there was a clear opportunity to develop more express lanes to many destinations and in particular to provide daily services as opposed to twice weekly which was in reality the industry norm.

So how to reduce our cost base, little could be done in most areas, local distribution at either end of the route had relatively little scope for reduction, some benefits came from increased drop density, that is to say more calls in tighter areas for these vehicles as a result of increased volumes, but sea crossing's, fuel, at least that purchased in mainland Europe, tolls and capital costs were pretty much standard for all operators and competitors, the answer had to lie in reduced labour costs but how?

Our solution came here in Tallinn, good experience by one of our German partners pointed us in this direction, thus in early 2001 we made our first visit to Estonia in search of a haulier or hauliers with the capacity, experience and expertise to provide us with a number of trucks, this was not unsurprisingly more difficult than it seemed, language, exposure to our concept of two manned crews going backward and forward from UK hub to partner terminal was minimal and to many beyond comprehension, in addition EU authorisation or CEMPT permits were tightly controlled so even those that were willing did not necessarily have the capacity.

However we made an agreement with the biggest operator we found, they were experienced in this type of operation, had the right type and standard of equipment and most importantly were prepared to build a relationship with us.

What impresses me about these companies, actually about so much of this area is the level of enthusiasm, the hunger and desire to get it right, whilst it would be wrong to suggest this exercise has been easy it is true to say that it has been made easier by the application of the people involved, you can all see around you here in Tallinn the level of investment, personally I find it extremely motivating, refreshing actually, to much of our time in the UK is spent frustrated by negatives.

This of course was only the beginning, we had exacting service schedules to keep to, the drivers had little English language comprehension, we of course even less Estonian or Russian, how should we communicate our instructions and indeed keep track of delay or problems which are inevitable in this type of operation, worse still perhaps were the industrial relations issues with our existing workforce.

The answer came in many ways, English speaking staff in Estonia relaying our instruction given by e-mail or SMS, Global Positioning satellite systems which we had already in operation in our own fleet trucks were installed and slowly the difficult issues faded into memory.

Our confidence in the operation was such that we felt able to launch a new product which was unprecedented in our sector, a total money back guarantee supported our Guaranteed express (GX) product which as is implied meant that we literally took on all the risk of failure be that mechanical, weather, striking farmers or seamen, our 'strap line' it gets there on time or it is free means just that, it is testimony to the standard of our haulier that we could make our claims with confidence, for the sake of record the failure rate is that of less than 1 per cent , we have no hesitation in meeting our obligations (credit notes are raised same day.)

The number of vehicles has risen to 70 operating on routes into Italy, Switzerland, France, Spain and Germany, similar operations to all other destinations, between them we are covering in excess of 1.3 million kms per annum.

It is however now an irony that increasing cost pressures, principally labour which I believe can be attributed directly to the accession to EU membership are now forcing us to broaden our horizons outside the member states. Romania has become a successful supplier of haulage with the same quality, ingenuity and industry as that experienced here in Estonia and the other Baltic states.

In addition we are looking East to Poland to supply mechanics and other specialist vehicle technicians, again the UK is suffering from lack of initiatives in training and recruitment in this area, again of course this is not simple, but the skills are there and we have an opportunity to 'dip into the pool', certainly there is the demand.

So what of the future, clearly the lessons learned here are that language is no barrier, that quality and expertise are available, enthusiasm and energy have no national barriers and can be harnessed to create multinational operations.

What we know is that the 'goal posts' are always moving, what is good today may be less good tomorrow, this is a competitive market, we cannot stand still.

New ideas and service commitments will give us the edge, excellent partners in each area be it forwarding, transportation are the only solution for profit, we just have to get out there and make it happen!

Thank you.